SOUTHERN CONNECTICUT BANKCORP EXHIBIT 10.7


SOUTHERN CONNECTICUT BANCORP, INC.


                 2001 Warrant Plan


              SOUTHERN CONNECTICUT BANCORP, Inc., a corporation organized and existing under the laws
of Connecticut (“Bancorp”), has adopted its 2001 Warrant Plan
(this “Plan”) with the intention of promoting the interests of
Bancorp and the shareholders of Bancorp by recognizing the contributions made by
the directors of Bancorp and The Bank of Southern Connecticut (In Organization)
(the “Bank”) for the services they rendered in connection with
the organization of Bancorp and the Bank. 


I.     PURPOSES OF THE PLAN


              1.1.     The purpose of this plan is recognizing the contributions made by the directors
of Bancorp and the Bank for their services in organizing Bancorp and the Bank,
including significant amounts of time devoted to organizational activities
without compensation, including services relating to obtaining the capital for
Bancorp and the Bank through the public offering by Bancorp (the
“Bancorp IPO”) of shares of its Common Stock.


II.     DEFINITIONS; RULES OF CONSTRUCTION


              
2.1.     Definitions.   The terms defined in this Article shall have the following meanings for purposes of this Plan:


              
              
                           (a)      
“Bancorp” shall mean Southern Connecticut Bancorp, Inc., a corporation organized and existing
under the laws of Connecticut.


              
              
                           (b)      
“Bank” shall mean The Bank of Southern Connecticut (In Organization).


              
              
                           (c)      “Board of Directors” shall mean the Board of Directors of Bancorp.


              
              
                           (d)      “Change in Control” means:


              
              
          
                           (i)     a change in
control of the direction and administration of Bancorp's business of a nature
that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or any
successor rule or regulation) promulgated under the Exchange Act, whether or not
Bancorp is then subject to such reporting requirements;


              
              
          
                           (ii)     any person (as such term is used in
Sections 14(d) and 14(d)(2) of the Exchange Act but
excluding any employee benefit plan of Bancorp) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Bancorp representing 50% or more of the combined 









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voting power of Bancorp's outstanding securities then entitled ordinarily (and apart from rights
accruing under special circumstances) to vote for the election of directors;


              
              
          
                           (iii)     during any period of two consecutive years, the
individuals who at the beginning of such
period constitute the Board of Directors or any individuals who would be Continuing Directors cease for any
reason to constitute at least a majority thereof;


              
              
          
                           (iv)     the Board of Directors shall approve a sale of all or substantially all of the assets of
Bancorp; or


              
              
          
                           (v)     the Board of Directors shall approve any merger, consolidation or like business
combination or reorganization of Bancorp, the consummation of which would result in the
occurrence of any event described in clause (ii) or (iii) above;


provided, however,
that none of the foregoing events shall constitute a Change in Control if such
event occurs as a result of an agreement or transaction approved by the
Continuing Directors, either before or after the occurrence of such event, and
the Continuing Directors in approving such agreement or transaction determine
that it is not in the best interest of Bancorp for such agreement or transaction
to constitute a Change in Control for purposes of this Plan.


              
              
                           (e)      “Common Stock”
shall mean the Common Stock, par value $0.01 per share, of Bancorp.


              
              
                           (f)       “Continuing Directors” means
each director of Bancorp as of the initial closing date of the
Bancorp IPO and any
successor to any such director and any additional director who (i) after
the effective date of this Plan was nominated or selected by a majority of the
Continuing Directors in office at the time of his or her nomination or selection
and (ii) at the time of his or her nomination or selection is not an
“affiliate” or “associate” (as defined in Regulation 12B
under the Exchange Act) of any person who is the beneficial owner, directly or
indirectly, of securities representing 25% or more of the combined voting power
of Bancorp’s outstanding securities then entitled ordinarily to vote for
the election of directors.


              
              
                           (g)      “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.


              
              
                           (h)      “Fair Market Value” shall mean
the average closing price per share of the Common Stock for the ten
trading days immediately
preceding the applicable date as reported on the composite tape of the principal
national stock exchange on which the Common Stock is then listed or, if the
Common Stock is not listed on any national stock exchange, the closing price per
share of Common Stock as reported on The NASDAQ Stock Market, Inc. If the Common
Stock is not listed on any national stock exchange or quoted on The NASDAQ Stock
Market, Inc., Fair Market Value shall mean the average bid price per share of
the Common Stock for the ten trading days








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immediately  preceding  the  applicable  date as reported  on such  reporting
system as shall be selected by the Board of  Directors.  If the Common  Stock is
not publicly  traded,  the Board of Directors  shall  determine  the Fair Market
Value  using  criteria  as it shall  determine,  in its sole  discretion,  to be
appropriate for the valuation. 


              
              
                           (i)      “Immediate Family” shall mean
any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, sibling, first
cousin, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive relationships. 


              
              
                           (j)      “Internal Revenue Code” shall
mean the Internal Revenue Code of 1986, as amended.


              
              
                           (k)      “Participant” shall
mean any director of Bancorp or the Bank who is granted a Warrant pursuant to
this Plan which remains outstanding.


              
              
                           (l)      “Plan” shall
mean this Warrant Plan, as amended from time to time.


              
              
                           (m)      “QDRO” shall
 mean a qualified domestic relations order as defined in Section 414(p) of the
Internal Revenue Code or
Title I, Section 206(d)(3) of the Employee Retirement Income Security
Act of 1974, as amended (to the same extent as if this Plan were subject
thereto), or the applicable rules thereunder.


              
              
                           (n)      “Rule 16b-3” shall
mean Rule 16b-3 under Section 16 of the Exchange Act, as amended from time to
time or any rule adopted in substitution therefor.


              
              
                           (o)      “Warrant” shall
mean a warrant granted to a Participant pursuant to this Plan.


              
              
                           (p)      “Warrant Agreement” shall
mean any agreement between Bancorp and a Participant evidencing a
Warrant.


              
              
                           (q)      “Warrant Exercise Price” shall
have the meaning specified in Section 4.4 of this Plan.

            
  2.2.     
Rules of Construction. For purposes of this Plan and any Warrant
Agreement, unless otherwise expressly provided or the context otherwise
requires, the terms defined in this Plan include the plural and the singular,
and pronouns of either gender or neutral shall include, as appropriate, the
other pronoun forms. 


III.     COMMON STOCK AVAILABLE UNDER THIS PLAN


              
3.1.     
Aggregate Share Limit.   The maximum number of shares of Common Stock
that may be issued under this Plan is 60,000,
subject to adjustment as provided in Article VI.










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3.2.     
Availability of Shares upon Termination of Warrants.   If any Warrant or
portion of a Warrant expires or otherwise terminates without having been
exercised, the number of shares of Common Stock as to which such Warrant expires
or otherwise terminates shall not longer be reserved for the purposes of this
Plan. 


             
 3.3.     
No Fractional Shares.   No fractional shares shall be issued. The Board of
Directors shall determine whether cash or other property shall be issued or paid
in lieu of such fractional shares of whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated. 


              
3.4.     Exercise Price; Withholding.   The exercise price for the Common Stock
issuable upon exercise of a Warrant and any withholding obligation under
applicable tax laws shall be paid in cash or any combination of (i) cash,
(ii) a check payable to the order of Bancorp, (iii) the delivery of
Common Stock having a Fair Market Value equivalent to the applicable exercise
price and withholding obligation, (iv) a reduction in the amount of Common
Stock otherwise deliverable pursuant to such Warrant. In the case of a payment
by the means described in clause (iii) or (iv) above, the value of the Common
Stock so delivered or offset shall be determined by reference to the Fair Market
Value of the Common Stock on the date as of which the payment or offset is made. 


            
  3.5.     
Cashless Exercise.   The Board of Directors may permit the exercise of a
Warrant and the payment of any applicable withholding tax in respect of a
Warrant by delivery of written notice, subject to Bancorp’s receipt of a
third party payment in full in cash for the exercise price and the applicable
withholding prior to issuance of Common Stock, in the manner and subject to the
procedures as may be established by the Board of Directors.


              3.6.     
Transfer of Common Stock to a Participant.   As soon as practicable after
receipt by Bancorp of payment for Common Stock with respect to which a Warrant
or portion thereof is exercised by a Participant, Bancorp shall issue to the
Participant the number of shares of Common Stock as to which such Warrant has
been exercised.


IV.     GRANT OF WARRANTS TO DIRECTORS


              4.1.     
Date of Grant.   The Warrant shall be granted as of the initial closing
date of the Bancorp IPO.


              
4.2.     Eligibility.   The persons who
shall be eligible to receive Warrants under this Article IV. shall be those persons
serving as directors of Bancorp or the Bank on the initial closing date of the Bancorp IPO and who are not an employees of Bancorp or
the Bank.


              4.3.     
Allocation of Warrants.   Each director of Bancorp eligible to receive a
warrant shall receive a Warrant for one share of Common Stock for each four
shares of Common Stock which such director or any member of such director’s
Immediate Family purchases in the Bancorp IPO. Each director of the Bank who is
not a director of Bancorp eligible to receive a warrant shall receive a Warrant
for one share of Common Stock for each five shares of Common Stock which such
director or any member of such 








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director’s Immediate Family purchases in the Bancorp IPO. Notwithstanding the foregoing, if
the aggregate number of shares covered by Warrants granted in accordance with
the foregoing would exceed the number of shares reserved for the purposes of
this Plan, the number of shares covered by the Warrant granted to each
Participant shall be determined by multiplying the number of shares which would
be covered by such Warrant determined in accordance with the foregoing by a
fraction the numerator of which is 60,000 and the denominator of which is the
aggregate number of shares which would be covered by the Warrants granted to all
Participants determined in accordance with the foregoing and reducing the
product so determined to the next lower whole number.


            
  4.4.     
Exercise Price.   The amount per share (the “Warrant Exercise
Price”) payable by the Participant to Bancorp upon exercise of the
Warrant shall be equal to the public offering price per share of Common Stock
specified in the definitive Prospectus distributed by Bancorp in connection with
the Bancorp IPO. 


              4.5.     Exercisability and Term of Warrants.


              
              
                           (a)      A Warrant shall become cumulatively
exercisable (i) as to 40% of the shares covered thereby on the
first anniversary of the
date of grant of the Warrant; (ii) as to an additional 30% of the shares covered
thereby on the second anniversary of the date of grant of the Warrant; and (iii)
as to the balance of the shares covered thereby on the third anniversary of the
date of the Warrant.


              
              
                           (b)      The term of each Warrant
shall be a period of ten years from the date of grant.


              
4.6.     
Effect of Termination of Service.   In the event that a Participant ceases
to be a director of Bancorp or the Bank, the Warrant held by such Participant,
to the extent exercisable at the time of such termination, shall remain
exercisable for the balance of its term. The Warrant granted to such
Participant, to the extent it was not exercisable at the time of such
termination, shall expire at the close of business on the date of such
termination. 


              
4.7.     
Acceleration of Exercisability Upon a Change in Control.   In the event of
a Change in Control of Bancorp, all then outstanding Warrants shall immediately
become exercisable in full. The Board of Directors, in its discretion, may
determine that, upon the occurrence of a transaction described in clauses (i)
through (v) of the definition of “Change in Control,” each Warrant
outstanding under this Plan shall terminate within a specified number of days
after notice to the Participant, and such Participant shall receive, with
respect to each share subject to such Warrant, cash in an amount equal to the
excess of the Fair Market Value of such share immediately prior to the
occurrence of such transaction over the Warrant Exercise Price per share subject
to such Warrant. 


            
  4.8.     Additional
Acceleration of Exercisability.   In
the event Bancorp delivers a notice to the Participants pursuant to
Section of 5.2(d) hereof, all then outstanding Warrants shall immediately become exercisable in full.










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              4.9.      Adjustments.   Warrants granted under this Article shall be subject to adjustment as provided in Article
VI. of
this Plan.


V.     WARRANT AGREEMENTS


              5.1.     
Warrant Agreements.   Each Warrant under this Plan shall be evidenced by a
Warrant Agreement in a form approved by the Board of Directors setting forth the
number of shares of Common Stock subject to the Warrant, and the price and term
of the Warrant. The Warrant Agreement shall also set forth (or incorporate by
reference) the other material terms and conditions applicable to the Warrant as
determined by the Board of Directors consistent with the limitations of this
Plan.


              5.2.     Incorporated Provisions.    Warrant Agreements shall be subject to the terms of this Plan and shall be deemed to
include the following terms:


              
              
                           (a)      Non-Assignability.  The
Warrant shall not be assignable nor transferable, except (i) by will or by
the laws of descent and
distribution or (ii) pursuant to a QDRO or any other exception to transfer
restrictions expressly permitted by the Board of Directors and set forth in the
Warrant Agreement (or an amendment thereto). The restrictions on exercise and
transfer shall not be deemed to prohibit, to the extent permitted by the Board
of Directors, transfers without consideration for estate and financial planning
purposes and transfers to such other persons or in such other circumstances as
the Board of Directors may in the Warrant Agreement expressly permit. During the
lifetime of a Participant, the Warrant shall be exercised only by such
Participant or by his or her guardian or legal representative, except as
expressly otherwise provided consistent with the foregoing transfer
restrictions. 


              
              
                           (b)      Rights as Shareholder.   A
Participant shall have no rights as a holder of Common Stock with
respect to any unissued Common Stock covered by a Warrant until the date the Participant becomes the holder of record of such Common
Stock.


              
              
                           (c)      Withholding.  The
Participant shall be responsible for payment of any taxes or similar charges
required by law to be
withheld with respect to the exercise of a Warrant, and these obligations shall
be paid by the Participant on or prior to the delivery of shares of Common Stock
upon exercise of a Warrant. A Participant shall satisfy the withholding
obligations as provided in Section 3.4. 


              
              
                           (d)      Regulatory Directives.   In the event that the
State or Federal agency which has primary regulatory
authority over Bancorp, the
Bank or any other banking subsidiary of Bancorp determines that such regulated
entity’s capital has fallen below minimum requirements for capital
adequacy, such agency may direct Bancorp to notify each Participant that any
portion of the Warrant held by such Participant that is not exercised by the
date specified in such notice will expire on such date. If any such notice is
given, any Warrant not exercised by such date shall terminate on such date.









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              5.3.     
Contract Rights, Forms and Signatures.   Any obligation of Bancorp with
respect to a Warrant shall be based solely upon the contractual obligations
created by this Plan and the applicable Warrant Agreement. No Warrant shall be
enforceable until the Warrant Agreement has been signed by the Participant and
on behalf of Bancorp. By executing a Warrant Agreement, a Participant shall be
deemed to have accepted and consented to the terms of this Plan, and any action
taken in good faith under this Plan by and within the discretion of the Board of
Directors or its delegates. Except as expressly provided in this Plan or in a
Warrant Agreement, there shall be no third party beneficiaries of the
obligations of Bancorp under such Warrant Agreement.


VI.     ADJUSTMENTS


             
 6.1.     
Changes in Capitalization.   If there shall occur any recapitalization,
stock split (including a stock split in the form of a stock dividend), reverse
stock split, merger, combination, consolidation, or other reorganization or any
extraordinary dividend or other extraordinary distribution in respect of the
Common Stock (whether in the form of cash, Common Stock or other property), or
any split-up, spin-off, extraordinary redemption, combination or exchange of
outstanding shares of Common Stock, or there shall occur any other similar
transaction or event in respect of the Common Stock, or a sale of all or
substantially all of the assets of Bancorp as an entirety, then the Board of
Directors shall, in the manner and to the extent, if any, as it deems
appropriate and equitable to the Participants and consistent with the terms of
this Plan, and taking into consideration the effect of the event on the holders
of the Common Stock:


              
              
                           (a)       proportionately adjust any or all of:


              
              
           
                           (i)     the number, amount and type of Common
Stock, other property or cash subject to any or all
outstanding Warrants;


              
              
           
                           (ii)     the exercise price of any
or all outstanding Warrants;


              
              
           
                           (iii)     the securities, cash
or other property deliverable upon exercise of the outstanding
Warrants;


              
              
           
                           (iv)     any other terms as are
effected by the event; or,


              
              
                           (b)       subject to any applicable
limitations under generally accepted accounting principles, provide for:


              
              
           
                           (i)     an appropriate and proportionate
cash settlement or distribution; or


              
              
           
                           (ii)     the substitution or exchange
of any or all outstanding Warrants.








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VII.     ADMINISTRATION


              7.1.     Authority and Structure.   This Plan and all
Warrants granted shall be administered by the Board of Directors.


              7.2.     
Construction and Interpretation.   The Board of Directors shall have the
power to interpret and administer this Plan and the Warrant Agreements, and to
adopt, amend and rescind related rules and procedures. All questions of
interpretation and determinations with respect to this Plan, the number of
shares of Common Stock and the terms of any Warrant Agreements, the adjustments
required or permitted by Article VI. and other determinations hereunder shall be
made by the Board of Directors and its determination shall be final and
conclusive upon all parties in interest. In the event of any conflict between a
Warrant Agreement and any non-discretionary provision of this Plan, the terms of
this Plan shall govern.


              7.3.     
Rule 16b-3 Conditions; Bifurcation of Plan.   It is the intent of Bancorp
that this Plan and the Warrants hereunder satisfy and be interpreted in a manner
that satisfies any applicable requirements of Rule 16b-3 so that the
Participants will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the Exchange Act and will not be
subjected to avoidable liability thereunder as to Warrants intended to be
entitled to the benefits of Rule 16b-3. 


              7.4.     
Delegation and Reliance.   The Board of Directors may delegate to the
officers or employees of Bancorp the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective administration
of this Plan in accordance with its terms and purpose. In making any
determination or in taking or not taking any action under this Plan, the Board
of Directors may obtain and may rely upon the advise of experts, including
professional advisors to Bancorp. No director, officer, employee or agent of
Bancorp shall be liable for any such action or determination made or omitted in
good faith.


              7.5.     
Exculpation and Indemnity.   Neither Bancorp nor any member of the Board of
Directors, nor any other person participating in any determination of any
question under this Plan, or in the interpretation, administration or
application of this Plan, shall have any liability to any person for any action
taken or not taken in good faith under this Plan or for the failure of a Warrant
to qualify for exemption or relief under Rule 16b-3 or to comply with any
other law, compliance with which is not required on the part of Bancorp.


VIII.     MISCELLANEOUS


              8.1.     No Right to Continue Service.   Nothing
contained in this Plan or any Warrant or Warrant Agreement shall confer upon
any Participant any right with respect to the continuation of service as a director of Bancorp or the Bank.


              8.2.     Effective Date.     This Plan has been adopted by the Board of Directors
and has become effect on the date of such
adoption.  This Plan shall remain in effect until any








9




and all Warrants under this Plan have been exercised, converted or terminated under the terms of this Plan and the
applicable Warrant Agreements.


              
8.2.     
Compliance with Laws.   This Plan, any Warrant Agreement and the grant,
exercise, conversion and operation of Warrants, and the issuance and delivery of
Common Stock and/or other securities or property under this Plan are subject to
compliance with all applicable federal and state laws, rules and regulations
(including, but not limited to, state and federal insider trading, registration,
reporting and other securities laws and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for Bancorp, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions (and the person acquiring such securities shall, if requested by
Bancorp, provide such evidence, assurance and representations to the Bancorp as
to compliance with any thereof) as Bancorp may deem necessary or desirable to
assure compliance with all applicable legal requirements.


              Bancorp
shall be under no obligation to effect the registration pursuant to the
Securities Act of 1933, as amended, or any regulation thereunder, of any
interests in this Plan or any shares of Common Stock to be issued hereunder or
to effect similar compliance under any state laws. Notwithstanding anything
herein to the contrary, Bancorp shall not be obligated to cause to be issued or
delivered any certificates evidencing shares of Common Stock pursuant to this
Plan unless and until Bancorp is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and the requirements of any securities
exchange on which shares of Common Stock are traded. The Board of Directors may
require as a condition of the issuance and delivery of certificates evidencing
shares of Common Stock pursuant to the terms of this Plan, that the recipient of
such shares make such covenants, agreements and representations, and that such
certificates bear such legends, as the Board of Directors, in its sole
discretion, deems necessary or desirable.


              The
transfer of any shares of Common Stock hereunder shall be effective only at such
time as counsel to Bancorp shall have determined that the transfer of such
shares is in compliance with all applicable laws, regulations of governmental
authorities and the requirements of any stock exchange on which shares of Common
Stock are traded. The Board of Directors may, in its sole discretion, defer the
effectiveness of any transfer of shares of Common Stock hereunder in order to
allow the transfer of such shares to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Board of Directors shall inform the
Participant in writing of its decision to defer the effectiveness of a transfer.
During the period of such deferral in connection with the exercise of a Warrant,
the Participant may, by written notice, withdraw such exercise and obtain the
refund of any amount paid with respect thereto.


              8.4.     Notification of Election Under Section 83(b) of the Internal Revenue Code.
   If any Participant shall, in connection
with the acquisition of shares of Common Stock under this Plan, make the election
permitted under Section 83(b) of the Internal









10




Revenue Code (i.e., an election to include in gross income in the year of
transfer the amounts specified in Section 83(b)), such Participant shall notify
Bancorp of such election within ten days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Section 83(b) of
the Internal Revenue Code. 


              8.5.     Ownership and Transfer
Restrictions.   
Common Stock acquired upon exercise of Warrants shall be subject to the
restrictions on ownership and transfer set forth in the Warrant Agreement.


              8.6.     
Non-Exclusivity of Plan.   Nothing in this Plan shall limit or be deemed to
limit the authority of Bancorp or the Board of Directors to grant awards or
authorize any other compensation, with or without reference to the Common Stock,
under any other plan or authority. 


             
 8.7.     Severability.   In case any
provision of this Plan shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions, or of such provision in any other jurisdiction, shall not in
any way be affected or impaired thereby.


              
8.8.     Expenses and Receipts.   The expenses of
this Plan shall be paid by Bancorp.  Any proceeds received by Bancorp in
connection with any Warrant will be used for general corporate purposes.


              8.9.     
Failure to Comply.   In addition to the remedies of Bancorp elsewhere
provided for herein, failure by a Participant (or beneficiary or transferee) to
comply with any of the terms and conditions of this Plan or the applicable
Warrant Agreement, unless such failure is remedied by such Participant (or
beneficiary or transferee) within ten days after notice of such failure by the
Board of Directors, shall be grounds for the cancellation and forfeiture of such
Warrant, in whole or in part, as the Board of Directors, in its absolute
discretion, may determine. 


              8.10.     Applicable Law.   This Plan,
any Warrant Agreement and any related documents and matters shall be governed in
accordance with the laws of the State of Connecticut, except as to matters of federal law.